SANLAM 1 · 2019. 12. 10. · SANLAM 5 on the Statement of Financial Position as set on these...

SANLAM 1

ANNUAL FINANCIAL STATEMENTS 2018 2

Contents

Director’s report 2-4Statement of directors’ responsibilities 6Report of the independent auditors 7-9

Financial Statements

Statement of comprehensive income 10Statements of financial position 11Statement of changes in equity 12Statement of cash flows 13Notes to the financial statements 14-55

SANLAM 3

Company Information

Directors

Enoch Rukidi* Chairman Mugo Kibati** Resigned 19 February 2018 Warren Bruce *** Appointed 19 February 2018 Nelius Bezuidenhout*** Resigned 1 January 2018Moses Mutuli** Appointed 1 January 2018John Lintari** Chief Executive Officer *Ugandan **Kenyan ***South African

Company Secretary

Kampala Associated AdvocatesPlot 41, Nakasero RoadP. O. Box 9566Kampala, Uganda

Principal place of business and registered office

Plot 15, Princess Anne Drive, BugolobiP. O. Box 25495Kampala, Uganda

Legal advisers

Kampala Associated AdvocatesPlot 41, Nakasero RoadP. O. Box 9566 Kampala, Uganda

Bankers

Standard Chartered Bank Uganda LimitedPlot 5, Speke RoadP O Box 7111, Kampala

Barclays Bank of Uganda LimitedPlot 5, Hannington RoadP. O. Box 7101, Kampala

DFCU Bank LimitedPlot 2, Jinja RoadP. O. Box 70, Kampala

Independent auditors

Ernst & Young Certified Public AccountantsErnst & Young HousePlot 18, Clement Hill RoadKampala.

Statutory Actuary

Edwin Splinter - Sanlam Group, South Africa.


Directors’ Report

The Directors present their report together with the audited financial statements for the year ended 31 December 2018, which discloses the state of affairs of Sanlam Life Insurance (Uganda) Limited (“the company”).

Incorporation and principal activity

Sanlam Life Insurance (Uganda) Limited was incorporated on 03 November 2009 as a private limited liability company.

The principal activity of the company is to provide various classes of long term insurance business as defined in the Insurance Act (Cap 213) including the re-insurance of any such business. The company also obtained approval from the Insurance Regulatory Authority of Uganda to provide a medical product, Sancare Medical Insurance.

Results

The company reported a net profit of Ushs 882 million (2017: Ushs 554 million) which has been offset against the accumulated losses.

Dividends

The directors do not recommend the payment of a dividend in 2018 (2017: Nil).

Reserves

Contingency reserve

Under section 5 (b) of the Insurance Regulations, 2002, the company is required to annually credit an amount equal to 1 percent of premiums to contingency reserves.

An amount of Ushs 311 million (2017: Ushs 248 million) has been transferred to the contingency reserve to comply with Section 5 (b) of the Insurance Regulations, 2002.

Capital reserve

The Insurance laws and regulations require the company to transfer from its profits for the year, before any dividend is declared and after provision has been made for taxation, a sum of 5 percent of the profits to capital reserves to facilitate capital base growth.

An amount of Ushs 91.2 million (2017: Ushs 27.7 million) has been transferred to the capital reserve to comply with insurance laws and regulations.

Statutory requirements

Share capital

Under Section 37 of the Insurance Act, 2017, the Company is required to have a minimum paid up capital of Ushs. 3,000 million (Three billion Uganda shillings). This requirement has been met by the Company at 31 December 2018 and 31 December 2017.

Issued and paid up share capital

The issued and paid up share capital is Ushs 21,714 million (2017: 18,690 million) which is divided into 21,714 (2017: 18,690) ordinary shares of Ushs 1,000,000 each.

Statutory deposit

Security deposits with Bank of Uganda (the Central Bank)

Under the Ugandan Insurance laws and regulations, the Company is required to make and maintain a security deposit with the Bank of Uganda of at least 10% of the prescribed paid-up capital. The Company has fulfilled this requirement by making a deposit of Ushs 2,698 million (2017: Ushs 2,325 million) with the Bank of Uganda.

Financial risk management and objective

The Company’s activities expose it to a variety of financial risks, including underwriting risk, equity market prices, foreign currency exchange rates and interest rates. The Company’s overall risk management programme focuses on the identification and management of risks and seeks to minimize potential adverse effects on its financial performance and position.

The Company’s risk management policies include the use of underwriting guidelines and capacity limits, reinsurance planning, policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place, which help manage liquidity, and seek to maximize return within an acceptable level of interest rate risk.

Related party transactions

Transactions with related parties during the year were in the normal course of business. Details of transactions and balances with related parties are included in note 22 to the financial statements.

Solvency

The Directors consider the Company’s solvency position

SANLAM 5

on the Statement of Financial Position as set on these financial statements to be satisfactory based on the fact that the Company’s solvency margin at 31 December 2018, and as at 31 December 2017, exceeded the minimum requirements of the Insurance Act, 2017.

Employee welfare

The Company’s employment terms are reviewed annually to ensure that they meet statutory and market conditions. The Company has a medical scheme that caters for medical needs of employees and their immediate dependents.

In order to improve the motivation of employees, the Company provides training and holds regular meetings with employees to elicit their views on the promotion of customer service and working conditions.

Directors

The directors who held office during the year up to the

date of this report are set out on page 1.

Auditors

In accordance with Section 108 of the Insurance Act, 2017, an insurance company’s auditors are required to rotate upon completion of audit for a continuous period of four years.

The auditors, Ernst & Young, who were appointed during the year, have expressed willingness to continue in office in accordance with section 167 (2) of the Companies Act, 2012 of Uganda and the Insurance Act, 2017.

By Order of the Board

Secretary

Date: ………….…………………2019

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Statement of Directors’ Responsibilities

The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the Companies Act of Uganda and, Ugandan Insurance Act and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The director’s responsibilities include: designing implementing and maintaining internal control relevant to the preparation and fair presentation of these financial statements that are free from material misstatements whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. They are also responsible for safe guarding the assets of the company.

Under the Companies Act of Uganda, the directors are required to prepare financial statements for each year that give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the operating results of the Company for that year. It also requires the directors to ensure the Company keeps proper accounting records that disclose with reasonable accuracy the financial position of the Company. The directors accept responsibility for the financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards, Ugandan Companies Act and Ugandan Insurance Act. The directors are of the

opinion that the financial statements give a true and fair view of the state of the financial affairs and the profit for the year ended 31 December 2018. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

The directors have made an assessment of the Company’s ability to continue as a going concern and have no reason to believe the business will not be a going concern for the next twelve months from the date of this statement.

Approval of the Financial Statements

The financial statements, as indicated above, were approved by the Board of directors on …………..…….2019 and were signed on its behalf by:

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SANLAM 7

Report of the Independent Auditors to the members of Sanlam Life Insurance Uganda Limited

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Sanlam Life Insurance Uganda Limited (“the Company”) set out on pages 11 to 75, which comprise the statement of financial position as at 31 December 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion the accompanying financial statements present fairly in all material respects, the financial position of Sanlam Life Insurance Uganda Limited as at 31 December 2018 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), the Ugandan Companies Act and the Ugandan Insurance Act.

Basis of Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Federation of Accountants’ Code of Ethics for Professional Accountants

(IFAC code) and other independence requirements applicable to performing audits of Sanlam Life Insurance Uganda Limited. We have fulfilled our other ethical responsibilities in accordance with the IFAC Code, and in accordance with other ethical requirements applicable to performing the audit of Sanlam Life Insurance Uganda Limited. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.


Key Audit Matter How the matter was addressed in the audit

Insurance contract liabilities

As stated in note 27, Insurance Contract Liabilities amounted to Ushs 14.4 billion. The life business policy liabilities and income recognition for the period is determined by actuarial valuations which are done by the Company’s designated actuarial expert.

The determination of insurance contract liabilities requires significant judgment in the determination of policyholders’ benefits that represent the estimated future benefit liability for traditional life insurance policies and include the value of accumulated declared bonuses or interest that have vested to the policy holders.

The reserves for life benefits for participating traditional life insurance policies are calculated using a gross level premium valuation method.

The calculation of reserves depends on the type of profit participation and is based on actuarial assumptions, such as guaranteed mortality benefits, interest rates, persistency, expenses and investment return, plus a margin for adverse deviations.

We reviewed the procedures/accounting policies around recognition of insurance contract liabilities and the application thereof to check that these are in compliance with IFRS.

We tested the models used in developing these balances, reviewing management’s assumptions in light of current market conditions, industry developments and policyholder behavior, and obtaining comfort over the completeness and accuracy of underlying data used in the calculations. We examined the biometric assumptions, such as mortality and disability and additional assumptions, such as investment return in light of the current market environment, the expected development within the industry as well, as the behavior of insurers.

The future life policyholder benefits are calculated using a discount rate. We have reviewed significant assumption changes made during the year with a focus on the interest rate used in the traditional life insurance policies. In assessing the interest rate used, we confirmed that the interest rates are supported by the anticipated economic performance of the assets backing the liability when considering any planned changes in asset strategy and reinvestment. In particular, we assessed the different components of the discount rate on a portfolio level (“individual life” and “group life”).

We verified the consistency of the assumptions made by management with assumptions made elsewhere (for example in the determination of the market consistent embedded value (MCEV), and

We reviewed the methodology for determining the selected discount rate, based on the above input parameters.

Other information

The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Financial Statements, but does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this information, we are required to report that fact. We have nothing to report in this regard.

Directors’ responsibilities for the financial statements

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Uganda, 2012 and the Insurance Act, 2017, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for overseeing the Company’s financial reporting processes.

SANLAM 9

Auditor’s Responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal requirements

As required by the Companies Act of Uganda, 2012, we report to you based on our audit, that:

i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account have been kept by the Company so far as appears from our examination of those books; and

iii. The Bank’s statement of financial position and statement of comprehensive income are in agreement with the books of account

The engagement Partner on the audit resulting in this independent auditor’s report is CPA Michael Kimoni – P0248.

Date.........................................2019

Young Certified Public Accountants of Uganda Kampala, Uganda

……………………......... Ernst &

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Statement of comprehensive income

for the year ended 31 December 2018

2018 2017

Notes Ushs ‘000 Ushs ‘000

Gross written premiums 4 35,185,474 24,803,785

Reinsurance gross premium ceded 4 (6,769,196) (323,265)

Net change in provision for unearned premium - Sancare (293,012) (689,293)

Net written premiums 28,123,266 23,791,227

Interest income using the EIR 5(a) 3,086,278 1,753,916

Other investment income 5(b) 194,557 108,347

Commission income 253,045 171,312

Other operating income 6 265,168 298,189

Fair value movement on quoted shares and unquoted shares 19 & 21 81,561 55,149

Net fair value losses on debt instruments at fair value through profit or loss (277,917) -

Other income 3,602,692 2,386,913

Total income 31,725,958 26,178,140

Claims incurred and policy holders’ benefits 7 (10,322,931) (10,654,750)

Claims ceded to reinsurers 2,488,196 273,820

Net change in insurance contract liabilities 8 (5,329,137) (1,671,241)

Net claims incurred (13,163,872) (12,052,171)

Finance Costs 9 - (68,176)

Expected credit losses on financial instruments 10(a) 20,347 -

Operating and administrative expenses 10(b) (12,914,102) (9,027,465)

Commissions expense (4,248,202) (4,439,191)

Total expenses (17,141,957) (13,534,832)

Total benefits, claims and other expenses (30,305,829) (25,587,003)

Profit before tax 1,420,129 591,137

Income tax charge 12(a) (538,251) (37,272)

Net profit for the year 881,878 553,865

Total comprehensive income 881,878 553,865

SANLAM 11

Statement of financial position

as at 31 December 2018

Note 2018 2017

Ushs ‘000 Ushs ‘000

CAPITAL EMPLOYED

Share capital 13 (a) 21,714,000 18,690,000

Share premium 13 (b) 47,000 47,000

Other reserves 13 (c) 49,250 49,250

Capital reserve 15 234,671 143,437

Contingency reserve 14 1,216,651 906,089

Accumulated loss (13,090,238) (13,353,997)

Shareholders’ funds 10,171,334 6,481,779

REPRESENTED BY:

Assets

Property and equipment 16 447,449 516,481

Intangible assets 17 13,435 28,130

Statutory deposits 18 2,698,244 2,325,611

Investment in unquoted shares 19 277,500 242,299

Held to maturity investments 20 - 14,616,588

Debt instruments – at amortised cost 20 6,004,597 -

Debt instruments – at fair value through profit or loss 20 17,419,763 -

Investment in quoted shares 21 312,157 265,797

Reinsurance receivables 23(a) 5,446,332 71,733

Deferred tax asset 24 425,125 538,945

Other receivables 25(a) 645,173 1,284,658

Premium receivables 25(b) 1,780,681 1,905,535

Deferred acquisition costs 29 1,440,767 1,192,933

Cash and bank balances 26 1,509,932 1,253,908

Total assets 38,421,155 24,242,618

Liabilities

Insurance contract liabilities 27 14,372,762 9,043,625

Provision for unearned premium 30 4,399,998 4,106,986

Reinsurance payable 23(b) 4,029,905 251,667

Commission payable 31 15,429 34,727

Amount due to related parties 22(a) 2,060,928 1,350,498

Medical claims payable 32 1,429,269 1,056,180

Other payables 28 1,941,530 1,917,156

Total liabilities 28,249,821 17,760,839

Net assets 10,171,334 6,481,779

The financial statements were on pages 15 to 75 approved for issue by the Board of directors on………….....…2019 and signed on its behalf by:

__________________ _________________Director Director


Statement of changes in equity

Share capital

Share premium

Contingency reserve

Capital reserve

Other reserves

Accumulated losses Total

Ushs’000 Ushs’000 Ushs’000 Ushs’000 Ushs’000 Ushs’000

At 1 January 2017 18,690,000 47,000 658,051 115,744 49,250 (13,632,131) 5,927,914

Total comprehensive income for the year - - - - - 553,865 553,865

Transfer to capital reserve - - - 27,693 - (27,693) -

Transfer to contingency reserve - - 248,038 - - (248,038) -

At 31 December 2017 18,690,000 47,000 906,089 143,437 49,250 (13,353,997) 6,481,779

Impact of adopting IFRS 9 - - - - - (216,323) (216,323)

Restated opening balance 18,690,000 47,000 906,089 143,437 49,250 (13,570,320) 6,265,456

At 1 January 2018 18,690,000 47,000 906,089 143,437 49,250 (13,570,320) 6,265,456

Issue of share capital 3,024,000 - - - - - 3,024,000

Total comprehensive income for the year -

-- -

-881,878 881,878

Transfer to capital reserve - - - 91,234 - (91,234) -

Transfer to contingency reserve - - 310,562 - - (310,562) -

At 31 December 2018 21,714,000 47,000 1,216,651 234,671 49,250 (13,090,238) 10,171,334

SANLAM 13

Statement of cash flows

Note 2018 2017



Adjustments for:Net change in insurance contract liabilities 5,329,137 1,671,241

Expected credit losses on bank balances 1,703 -

Expected credit losses on debt instruments (22,050) -

Fair value movements on debt instruments 277,917 -

Accrued interest income (845,978) (404,112)

Depreciation 10 137,191 125,455

Amortisation 10 91,151 18,062

Gain on sale of property and equipment (58,254) (9,522)

Change in fair value of quoted/unquoted shares (81,561) (55,149)

6,249,385 1,937,112

Movement in:

Receivables arising out of reinsurance (5,374,599) 18,618

Reinsurance payables 3,778,238 80,887

Other receivables 516,505 (110,784)

Related party balances 710,430 1,003,780

Technical reserves 293,012 1,240,720

Reinsurance and commission payable (19,298) (56,433)

Other payables 397,463 346,456

Cash generated from operations 6,551,136 4,460,356

Tax paid: 12 (a) (424,431) (287,782)

Net cash generated from operating activities: 6,126,705 4,172,574

Investing activities

Purchase of property and equipment 16 (116,030) (258,700)

Purchase of intangible assets 17 (76,456) (20,599)

Proceeds from disposal of property and equipment 106,125 16,200

Investment in government securities and deposits (37,386,858) (27,134,746)

Maturity of financial assets 28,908,335 22,832,484

Statutory deposits – additional investments 18 (690,238) (2,493,936)

Statutory deposits – Maturities 18 362,144 670,054

Purchase of stock from listed entities - (72,859)

Net cash used in investing activities (8,892,978) (6,462,102)

Financing activities

Shareholders’ contribution 3,024,000 -

Cash flows from financing activities 3,024,000 -

(Decrease)/Increase in cash and cash equivalents 257,727 (2,289,528)

Expected credit losses on bank balances (1,703) -

At 1 January 1,253,908 3,543,436

At 31 December 26 1,509,932 1,253,908


Notes to Financials

1. Reporting entity

Sanlam Life Insurance (Uganda) Limited is a limited liability company incorporated under the Companies Act of Uganda and domiciled in Uganda. The principal activity of the company is to carry on any class of long term insurance business and to provide a medical insurance product, as defined in the Insurance Act, 2007 including the re-insurance of any such business. The Company is also licensed to provide a medical product, Sancare Medical Insurance.

2. Basis of preparation

The financial statements are prepared in accordance with and comply with International Financial Reporting Standards. Except for policy holder investments, investments in quoted and unquoted shares measured at fair value through profit or loss (FVTPL), the financial statements are prepared under the historical cost convention, as modified by the carrying of impaired assets at their recoverable amounts, and actuarially determined liabilities at their present value. The financial statements are presented in Uganda Shillings (Ushs), rounded to the nearest thousand.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the directors’ best knowledge of current events and actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgment or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.3

3. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated;

» Classification of contracts

A contract is classified as insurance where the company accepts significant insurance risk by agreeing with the policyholder to pay benefits if a specified uncertain

future event (the insured event) adversely affects the policyholder or other beneficiary. Significant insurance risk exists where it is expected that for the duration of the policy or part thereof, policy benefits payable on the occurrence of the insured event will significantly exceed the amount payable on early termination, before allowance for expense deductions at early termination. Once a contract has been classified as an insurance contract, the classification remains unchanged for the remainder of its lifetime, even if the insurance risk reduces significantly during this period.

» Life insurance contract liabilities

Life insurance liabilities are recognized when contracts are entered into and premiums are charged. These liabilities are measured by using the gross premium method. The liability is determined as the sum of the discounted value of the expected future benefits, claims handling and policy administration expenses, policyholder options and guarantees and investment income from assets backing such liabilities, which are directly related to the contract, less the discounted value of the expected premiums that would be required to meet the future cash outflows based on the valuation assumptions used. The liability is either based on current assumptions or calculated using the assumptions established at the time the contract was issued, in which case, a margin for risk and adverse deviation is generally included. A separate reserve for longevity may be established and included in the measurement of the liability. Furthermore, the liability for life insurance contracts comprises the provision for unearned premiums and premium deficiency, as well as for claims outstanding, which includes an estimate of the incurred claims that have not yet been reported to the company.

In line with IFRS 4, the company assesses the adequacy of the recognised insurance contract liabilities using current estimates of future cash flows. If the assessment shows that the carrying amount of the insurance contract liabilities is inadequate in the light of related future cash flows, the entire deficiency is recognised in profit or loss.

The insurance contract provisions are valued using realistic expectations of future experience, with margins for prudence and deferral of profit emergence. The provision, estimation techniques and assumptions are periodically reviewed, with changes in estimates reflected in the profit or loss as they occur. Whilst the Directors consider that the insurance contract provisions and the related reinsurance recovery are fairly stated on the basis of the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may result in significant adjustments to the amount provided.The insurance contract liabilities are determined through an actuarial valuation done on an annual basis.

SANLAM 15

Group credit liabilities

For personal loans, unearned premium reserve (UPR) is calculated as a reducing balance of the single premium received over the term of the loan. A loss ratio of 80% (2017: 80%) is then applied to the UPR. An Incurred But Not Reported (IBNR) reserve equivalent to one month of earned premium is also maintained.

Group life liabilities

This is annually renewable business with cover restricted to the period covered by premiums.For this business, the company holds an Unearned Premium Reserve (UPR), which represents the element of premiums already received where cover has not yet been provided. A loss ratio of 80% (2017: 80%) is then applied to the UPR.

Individual life liabilities

Two reserves are considered for this valuation, the unit reserve and the shillings reserve (or non-unitized reserve). The unit reserve is the reserve held in respect of the investment account component for the investment products. It represents the total value of investment funds held in respect of policyholders and is calculated as the number of units times the unit price as at the valuation date. For the shillings reserve (or non-unitized reserve), all policies are valued on a policy-by-policy Financial Soundness Valuation (FSV) method. The shilling reserves is calculated by subtracting the present value of the future projected income to the company (predominantly premiums and investment income) from the present value of the future projected outflow of the company (predominantly claims and expenses). The estimates of projected income and outflows are based on a set of realistic assumptions (best estimate assumptions) with an added margin for prudence. In addition, the statutory actuary may choose to strengthen these margins by applying an additional layer of what is known as discretionary margins. Thus, the valuation basis results in a larger reserve than would be required on a true best estimate basis. The degree of conservatism in the results depends on the extent of the discretionary margins.

Group Deposit Administration Liabilities

The Deposit Administration business was introduced in 2015. This is a with-profit arrangement where Sanlam Uganda is responsible for collecting contributions; investing them appropriately and managing the individual member accounts. Interest added to each account in the first three years from the date of joining the scheme is guaranteed to be 7.5% to 8% per annum. The reserve is calculated as the build-up of actual member contributions at a prudent rate of investment return, less charges and claims. An average investment return (net of management charges and withholding tax) of 8.5% (2017: 9.0%) was used to calculate the reserve for the December 2018 valuation.

Medical

Medical insurance contract liabilities include the outstanding claims provision, the provision for unearned premium and the provision for premium deficiency. The outstanding claims provision is based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. The cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques. The main assumption underlying these techniques is the company’s past claims development experience.

The provision for unearned premiums represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date. The portion of premiums received on in-force contracts that relates to unexpired risks at the statement of financial position date is reported as an unearned premium liability.

Adjustments to the liabilities at each reporting date are recorded in the statement of comprehensive income in ‘gross change in contract liabilities’. The liability is derecognised when the contract expires, is discharged or is cancelled. Refer to Note 27 for the actuarial findings. When the present value of expected future cash flows, results in an asset, the asset is recognized on the statement of financial position.

» Reinsurance

The company cedes insurance risk in the normal course of business. Outward reinsurance premiums are accounted for in the same period as the related premiums for the direct or inwards reinsurance business being reinsured. Reinsurance liabilities comprise premiums payable for outwards reinsurance contracts. Reinsurance assets include balances due from reinsurance companies relating to the portion of the insurance liability that is recoverable from the reinsurer. Reinsurance assets are measured in accordance with the terms of the reinsurance contract.

Gains or losses on buying reinsurance are recognised in the statement of comprehensive income immediately at the date of purchase and are not amortised.

Ceded reinsurance arrangements do not relieve the company from its obligations to policyholders.Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract.Claims are presented on a gross basis for ceded reinsurance.

Reinsurance liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.


» Revenue recognition

Premium income

Gross premiums

Gross recurring premiums on life are recognised as revenue when payable by the policyholder. For single premium business, revenue is recognised on the date on which the policy is effective. Monthly premiums in respect of certain products are accounted for in accordance with the terms of their policy contracts. Cover only commences when premiums are received.

For medical insurance, written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period. They are recognised on the date on which the policy commences, and adjusted for, by recognition of the unearned premium reserve (UPR).

Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. The unearned portion of accrued premiums is included within long-term policy liabilities.

Reinsurance premiums

Gross reinsurance premiums on life contracts are recognised as an expense on the earlier of the date when premiums are payable or when the policy becomes effective.

Investment income

Interest income (including income on DAP funds) is recognised in the statement of comprehensive income as it accrues and is calculated by using the effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument. Dividend income is recognised in the statement of comprehensive income when authorised by the counterparty, and the Company has an unconditional right to receipt of the amount due.

» Benefits, claims and expenses recognition

Gross benefits and claims for life insurance contracts include the cost of all claims arising during the year, including internal and external claims handling costs that are directly related to the processing and settlement of claims.

Death claims and surrenders are recorded on the basis of notifications received. Maturities and annuity payments are recorded when due.

Medical claims include all claims occurring during the year, whether reported or not, related internal and

external claims handling costs that are directly related to the processing and settlement of claims.

» Share capital

Share capital is classified as equity where the company has no obligation to deliver cash or other assets to shareholders.

» Property and equipment

Property and equipment is stated at cost, excluding the costs of day-today servicing, less accumulated depreciation and accumulated impairment losses.

Depreciation is provided for on a straight-line basis over the useful lives of the following classes of assets:

Computer equipment 33%

Furniture, fittings and other equipment 10%

Motor vehicles 25%

Leasehold improvements 10%

The assets’ residual values, and useful lives and method of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. Impairment losses are recognised in the statement of comprehensive income as an expense.An item of property and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised.

» Financial assets

Initial recognition and measurement

On 1 January 2018, the Company adopted IFRS 9 financial instruments using the modified retrospective method of adoption. The cumulative effect of initially adopting IFRS 9 is recognised as an adjustment to the opening balance of retained earnings. Therefore, the comparative information has not been restated and continues to be reported under IAS 39 as follows:Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

SANLAM 17

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are i.e., the date that the company commits to purchase or sell the asset.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

i. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets designated upon initial recognition at fair value through profit or loss. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as losses (negative net changes in fair value) or gains (positive net changes in fair value) in the statement of comprehensive income. Financial assets designated upon initial recognition at fair value through profit or loss are designated at their initial recognition date and only if the criteria under IAS 39 are satisfied.

ii. Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the company has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortised cost using the effective interest rate, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included as finance income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income in finance costs. On adoption of IFRS 9, these instruments are now classified at amortised cost, as disclosed later.

iii. Other assets and amounts due from related parties

The above financial assets are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as ‘Financial assets held for trading’, designated as ‘financial Investments-available for sale’ or ‘financial assets designated at fair value through profit or loss’. After initial measurement, these financial assets are subsequently measured at amortised cost, using the effective interest rate method, less allowance for impairment. On adoption of IFRS 9, these instruments are now classified at amortised cost. Amortisation is calculated by taking into account any discount or premium on acquisition fees and costs that are an integral part of the effective interest rate. The amortization is included

in the statement of comprehensive income. The losses arising from impairment are included in the statement of comprehensive income.

Derecognition of financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired; andThe company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either

(a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

The company assesses at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.


If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as finance income in the statement of comprehensive income. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the company.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the statement of comprehensive income.

Financial liabilities – initial recognition and subsequent measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives as appropriate. The company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value. The company’s financial liabilities include reinsurance and other payables and amounts due to related parties.

The financial liabilities are subsequently measured at amortised cost, using the effective interest rate (EIR) method. The EIR amortisation is included in finance costs in the statement of comprehensive income.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the statement of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the company.

i. Impact of adoption of IFRS 9

On 29 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard which bring together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

On 1 January 2018, the Company adopted IFRS 9 on its effective date of 1 January 2018.

The Company has taken advantage of the exemption that allows it not to restate comparative information for prior periods with respect to classification and measurement, including impairment changes, in the scope of IFRS 9.

Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 have been recognized in retained earnings and reserves as at 1 January 2018. Therefore, the comparative information for 2017 is reported under IAS 39 and is not comparable to the information presented for 2018.

Changes to classification and measurement

IFRS 9 introduces a principles-based approach to the classification of financial assets. All financial instruments, except equity instruments and derivatives, including hybrid contracts are measured at fair value through profit or loss (FVTPL), fair value through comprehensive income (FVOCI) or amortized cost, based on the (i) their business model and (ii) the instrument’s contractual cash flow characteristics.

These categories replace the IAS 39 classifications of FVTPL, available for sale (AFS), loans and receivables, and held to maturity.

Equity instruments are measured at FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be made on initial recognition to measure them at FVOCI with no subsequent reclassification to profit or loss.

For financial liabilities, most of the pre-existing requirements for classification and measurement previously included in IAS 39 were carried forward unchanged into IFRS 9 other than the provisions relating

SANLAM 19

the recognition of changes in own credit risk for financial liabilities designated at fair value through profit or loss, as permitted by IFRS 9. The table below summarizes the changes in classification of financial instruments recognized in accordance with IAS 39, after the adoption of IFRS 9:

As at 1 January 2018, the Company classified its financial instruments at amortized cost, if both of the following conditions were met:

i. The financial assets are held within a business model with the objective to hold financial assets in order to collect contractual cash flows (business model test)

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding (SPPI test)

Instruments at fair value through profit or loss

The Company has designated certain financial assets that would otherwise meet the requirements to be measured at amortized cost, as at fair value through profit or loss (FVTPL), to significantly reduce an accounting mismatch that would have arisen, since the underlying liabilities (insurance contract liabilities) are assessed by actuarial techniques based on fair valuation assumptions. The instruments include fixed deposits, treasury bills and treasury bonds that are directly attributable to policy holders. The following methodologies applied in the valuation of insurance contract liabilities, are based on fair valuation techniques:

Individual Life Liabilities:

• The unit reserve, which relates to the savings component of Dreambuilder policies is calculated as the number of units multiplied by a unit price (less a surrender penalty for inactive policies).

• A bonus stabilization reserve for the Dreambuilder product which is assessed an accumulation for past over-/ under declarations of bonuses relative to the actual investment return earned on the funds, and:

• Non-unit reserves are also calculated by projecting all future outgoes less all future income and discounting these reserving cash flows back to the valuation date.

Group Life Liabilities

• An Unearned Premium Reserve is calculated to represent the element of premiums already received where cover has not yet been provided. Upfront costs equal to the commission rate paid per scheme are then subtracted from the UPR.

• For personal loans, an Unearned Premium Reserve, an INBR equivalent to earned premiums is held. A run-down of the UPR takes into account, changes in sum assured over the loan term, therefore a reducing sum assured UPR is adopted

Financial Instrument Classification under IAS 39

Classification under IFRS 9

Measurement

Cash and balances with banks

1 Loans & receivablesCash and cash equivalents

Amortized cost

Treasury bills and bonds, and fixed deposits – shareholder funds

2 Loans & receivablesDebt instruments at amortized cost

Amortized cost

Statutory deposits 2 Loans & receivablesDebt instruments at amortized cost

Amortized cost

Treasury bills and bonds, and fixed deposits – policy holder funds

2 Loans & receivablesFair value through profit or loss

Amortized cost

Investment in quoted/unquoted shares

3Fair value through profit or loss

Fair value through profit or loss

Fair value

Reinsurance receivables 4 Not in scope** Not in scope** Not in scope**Premium receivables 4 Not in scope** Not in scope** Not in scope**Other receivables 5 Loans & receivables Amortized cost Amortized cost

**In accordance with IFRS 9, rights and obligations arising from insurance contracts are not in the scope of IFRS 9 and therefore the measurement criteria for premium receivables remains unchanged, after the adoption of IFRS 9. The change in carrying amounts relates to additional impairment allowances and fair values losses amounting to Ushs 216 million.


for credit life polices where the data is available. Upfront costs equal to the actual commission rate paid per scheme are then subtracted from the UPR.

• Under the Deposit Administration business, Sanlam Uganda collects contributions and invests them. Interest is added to each account in the first three years from the date of joining the scheme, with a guaranteed rate ranging from 7.5% to 8% per annum. The total reserve held is the market value of the fund.

The market value of the fund refers to the underlying assets of the deposit administration portfolio and is an accumulation of the net contributions at the actual investment returns earned, which can be positive or negative. A portion is allocated to member accounts representing the guaranteed benefit payable and is an accumulation of the net contributions at the bonus rates declared. A bonus stabilization reserve (BSR), which is the difference between the market value (the total reserve) and the book value (member accounts) is continually assessed.

Transition disclosures

The following pages set out the impact of adopting IFRS 9 on the statement of financial position and retained earnings including the effect of replacing IAS 39’s incurred credit loss calculations with IFRS 9’s ECLs:

IAS 39 Category

IFRS 9Category

IAS 39 measurement

Re-measurement (ECL/Fair value changes)

IFRS 9 measurement

Amount (Ushs’000)

Amount (Ushs’000)

Amount (Ushs’000)

Financial assets

Cash and balances with banks L & R AC1 1,253,908 (14,678) 1,239,230

Staff debtors L & R AC 45,932 - 45,932

Statutory deposits L & R AC1 2,698,244 (25,443) 2,672,801

Financial investments held to maturity L & R

AC1 4,838,043 (90,790) 4,747,253

FVTPL2 9,778,545 (85,412) 9,693,133

Investments in quoted and unquoted shares FVTPL FVTPL 508,096 - 508,096

19,122,768 (216,323) 18,906,445

Financial liabilities

Amount due to related parties L & R AC 1,350,498 - 1,350,498

Other payablesL & R AC 1,362,939 - 1,362,939

2,713,437 - 2,713,437

Total change in equity due to adopting IFRS 9: (216,323)

1The company has assessed expected credit losses on these instruments, held at amortized cost, as at 1 January 2018. The expected credit loss computations indicated that a higher provision should have been recognized. There were no loss provisions recognized on these financial instruments as at 31 December 2017.

2On initial recognition (under IAS 39), these instruments were classified as held to maturity. Under IFRS 9, these instruments have been reclassified to fair value through profit or loss (FVPL) to significantly reduce an accounting mismatch, since the underlying liabilities, are measured at fair value. The re-measurement relates to the fair value loss that was recognized on 1 January 2018.

SANLAM 21

Business model test

The Company determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective.

The Company’s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:

• How the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel

• The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed

• How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected)

• The expected frequency, value and timing of sales are also important aspects of the Company’s assessment. The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Company’s original expectations, the Company does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly assessed financial assets going forward.

After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost.

Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the Effective Interest Rate (EIR). A compound financial instrument which contains both a liability and an equity component is separated at the issue date.

The accounting for financial liabilities has remained largely the same as it was under IAS 39.

SPPI test

As a second step of its classification process the Company assesses the contractual terms of the financial assets to identify whether they meet the SPPI test.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may

change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).

The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVPL. From 1 January 2018, the Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line.

Financial liabilities are never reclassified. The Company did not reclassify any of its financial assets or liabilities in 2018.

Changes to the impairment calculation The adoption of IFRS 9 has fundamentally changed the Company’s accounting for credit losses by replacing IAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. The impairment model is applied to all financial assets except for financial assets classified as at FVTPL and equity securities designated as at FVOCI, which are not subject to impairment assessment.

Under IAS 39, impairment losses are recognized, if and only if, there is objective evidence of impairment as a result of one or more loss events that have occurred after initial recognition of the asset and that loss event has a detrimental impact on the estimated future cash flows of the asset that can be reliably estimated. If there is no objective evidence of impairment for an individual financial asset, that financial asset is included in a group of assets with similar credit risk characteristics and collectively assessed for impairment losses incurred but not yet identified.

Under IFRS 9, ECLs are recognized in profit or loss before a loss event has occurred, which could result in earlier recognition of credit losses compared to the IAS 39 model.

Under IAS 39, incurred losses are measured by incorporating reasonable and supportable information about past events and existing conditions. Under IFRS 9, the ECL model, which is forward-looking. In


addition, IFRS 9 requires that forecasts of future events and economic conditions be used when determining significant increases in credit risk and when measuring expected losses.

Therefore, from 1 January 2018, the Company has been recording the allowance for expected credit losses for all debt financial assets held at amortized cost.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss (12mECL).

The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date.Changes to the impairment calculation (continued)

Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments.

The Company has established a policy to perform an assessment, at the end of each month, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument.

Based on the above process, the Company groups its financial instruments into Stage 1, Stage 2, Stage 3 and POCI, as described below:

Stage 1: When loans are first recognised, the Company recognises an allowance based on 12mECLs. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2. Sanlam Life InsurLimited has included relative and absolute thresholds in the definition of significant increase in credit risk and a backstop of 8 days past due. All financial instrument that are 30 days past due are migrated to stage 2.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the COMPANY records an allowance for the LTECLs. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.

Stage 3: Loans considered credit-impaired. The Company records an allowance for the LTECLs.

POCI: Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognised based on a credit-adjusted EIR. ECLs are only recognised or released to the extent that there is a

subsequent change in the expected credit losses.

For financial assets for which the Company has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

Calculation of ECL

The Company calculates ECLs by measuring the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.The mechanics of the ECL calculations are outlined below and the key elements are, as follows:

PD The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

EAD The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments.

LGD The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

Under stage 1, The 12mECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR. This calculation is made for each of the four scenarios, as explained above.

When a financial instrument has shown a significant increase in credit risk since origination (stage 2), the PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR. For financial instruments considered credit-impaired, the Company recognises the lifetime expected credit losses for these loans. POCI assets are financial assets that are credit impaired on initial recognition. The COMPANY only recognises the cumulative changes in lifetime ECLs since

SANLAM 23

initial recognition, discounted by the credit adjusted EIR.

The company applies the simplified model applies for staff debtors and other receivables with maturities of less than 12 months.

ECL models

In its ECL models, the Company relies on a broad range of forward-looking information as economic inputs, such as:• GDP growth

• Unemployment rates

• Central Bank base rates

• Inflation rates

• Interest rates

• Exchange rates

• Domestic borrowing

• Credit to private sector

The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material.

Impairment of investments and bank balances

Investments in treasury bills, treasury bonds, investments in fixed deposits and bank balances are impaired by applied the following:

A probability of default determined from a credit rating from Fitch. A probability of default is assigned to the credit rating obtained. When a credit from Fitch is not available, Standard & Poor and Fitch are used. The loss given default is assigned at 45% based on Basel specifications.

Definition of Default

IFRS 9 does not define default but requires the definition to be consistent with the definition used for internal credit risk management purposes. IFRS 9 contains a rebuttable presumption that default does not occur later than when a financial asset is 90 days past due. Under IFRS 9, the Company will consider a financial asset as credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of a financial asset have occurred or when contractual payments are 90 days and above past due.

Write-offs

The Company’s accounting policy under IFRS 9 remains the same as it was under IAS 39. Financial assets are

written off either partially or in their entirety only when the Company has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to profit or loss.

Hedging accounting

The company had no hedging relationships as at 1 January 2018, hence no impact on transition to IFRS 9.

Other adjustments

In addition to the adjustments described above, upon adoption of IFRS 9, other items of the primary financial statements such as deferred taxes, income tax expense and retained earnings were adjusted as necessary.

» Impairment of non-financial assets

The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the company makes an estimate of the asset’s or CGU recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates


used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

» Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position. Cash and cash equivalents are valued at amortised cost.For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.

» Taxes

Current income tax

Current income tax is provided for in the statement of comprehensive income on the basis of the results included therein adjusted in accordance with the provisions of the Income Tax Act (Cap. 340).Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, by the reporting date.Revenues, expenses and assets are recognised net of the amount of Value Added Tax (VAT) except:

• Where the VAT incurred on a purchase of goods and services is not recoverable from Uganda Revenue Authority, in which case the VAT is recognized as part of the cost of the acquisition of the asset or as part of the expense for the item as applicable; and

• Receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from or payable to the tax authority is included as part of receivables or payables in the statement of financial position.

Deferred income tax

Deferred income tax is provided for using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial

recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred income tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred income tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

SANLAM 25

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

» Foreign currency translation

The company’s financial statements are presented in Uganda Shillings (Ushs), which is also the company’s functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the company at their respective functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the statement of comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

» Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible asset. An intangible asset is derecognized upon disposal or when no further economic benfits are expected from its use or disposal.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the asset is derecognised.

» Provisions

Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

» Employee benefits

National Social Security Fund (NSSF)

The company contributes to the statutory National Social Security Fund (NSSF). This is a defined contribution scheme registered under the National Social Security Act. The company’s obligations under the scheme are limited to specific contributions legislated from time to time and are currently 10% of the employees’ gross salary. The company’s contributions are charged to the statement of comprehensive income in the period to which they relate.

Other employee benefits

The company recognizes initially, and at each reporting period, a liability at the fair value of cash settled transactions, with changes in fair value recognized in employee benefits expenses. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The company also recognizes a medical expense for certain grades of permanent employees included in the group medical aid, paid for by the Company.

» Deferred acquisition costs

Deferred acquisition costs relate to commission paid in advance. The company fully recognizes deferred acquisition costs upon payment and these are amortised on a monthly basis over twelve months.

» New standards, amendments and interpretations

New standards, amendments and interpretations effective and adopted during the year ended 31 December 2018

During the current year, the Company has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretation Committee (IFRIC) that are relevant to its operations and effective for annual reporting periods beginning on 1 January 2018. The adoption of these new and revised standards and interpretations has not resulted in material


changes to the Company’s accounting policies.

The Company adopted the following standards, interpretations and amended standards during the year:

IFRS 9 Financial Instruments IFRS 9 Financial instruments replaces IAS 39 Financial Instruments: Recognition and measurement. The standard applies to recognition, measurement, impairment, de-recognition of financial instruments, and general hedge accounting.The standard has fundamentally changed the Company’s financial statement recognition and impairment processes, and is discussed in detail in note 3 (l).

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – Amendments to IFRS 4

The amendment, issued in September 2016 provides a deferral option for entities that issue insurance contracts within the scope of IFRS 4. Applying IFRS 9 Financial instruments (amendments) allows an entity that issues insurance contracts the opportunity to utilize two options - where IFRS 9 is applied prior to the forthcoming insurance contracts standard. These are (a) the overlay approach - which permits an insurer to reclassify certain income/expenditure, arising from designated financial instruments, from profit or loss to OCI, and (b) the deferral approach - temporary exemption from IFRS 9 for insurers whose predominant activity is issuing insurance contracts.The Company has assessed that the amendment will not any significant impact on the company’s financial statements.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 replaced all existing revenue requirements in IFRS (IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real Estate, IFRS 18 Transfer of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as IAS 17.Adoption of the standard did not have a significant impact on the financial reporting of the Company.

Clarifications to IFRS 15 In April 2016, the IASB issued amendments to IFRS 15 to address several implementation issues discussed by the Joint Transition Resource Group for Revenue Recognition.The clarifications did not have a significant impact on the financial reporting of the Company.


Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2

In June 2016, the IASB issued amendments to IFRS 2 Share Based Payments to clarify the classification and measurement of share-based payment transactions.

The clarifications did not have a significant impact on the financial reporting of the Company.

Annual Improvements 2014–2016 Cycle (short-term exemptions)

Following is a summary of the amendments from the 2014–2016 annual improvement cycle, that became effective during the year:

IFRS 1 First-time Adoption of International Financial Reporting Standards – deletion of short-term exemptions for first-time adopters. IAS 28 Investment in Associates and Joint Ventures –Clarification that measuring investees at fair value through profit or loss in an investment-by-investment.

The amendments did not have a significant impact on the financial reporting of the Company.

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

Foreign Currency Transactions and Advance Consideration - Amendments clarifying the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.

SANLAM 27


Transfers of Investment Property – Amendments to IAS 40

The amendments require that an entity shall transfer a property to, or from investment property, when and only when, there is evidence of a change in use. The amendment clarifies that a change in use occurs if property meets, or ceases to meet, the definition of investment property, and that a change in management’s intention does not, in itself constitute evidence of a change in use.

New and revised International Financial Reporting Standards issued but not yet effective.

At the date of authorization of these financial statements, the following standards and interpretations were in issue but not yet effective:

Pronouncements Annual periods beginning on or after

Conceptual framework for financial reporting

In March 2018, the IASBN issued the revised Conceptual Framework for Financial Reporting (Conceptual Framework). The revised framework addresses the balance between concepts and details for the framework to the useful to the Board and the users.The Company will adopt the Framework on its effective date.

1 January 2020

IFRS 16 Leases Leases - A new accounting standard that replaces the following standards and interpretations: IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives, SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying assets has a low value. The accounting processes for lessors will remain unchanged with leases being classified as either operating or finance, as was the case with IAS 17.The company currently has a number of office premises that were initially treated as operating leases. The Company is assessing the extent to which a right to use the assets during the lease term will be recognized in the financial statements for the year ending 31 December 2019.

1 January 2019

Prepayment Features with Negative Compensation – Amendments to IFRS 9

The amendment clarifies that a financial asset passes the SPPI test regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.

The Company will adopt the amendment on its effective date.

1 January 2019


New and revised International Financial Reporting Standards issued but not yet effective.

At the date of authorization of these financial statements, the following standards and interpretations were in issue but not yet effective:

Pronouncements Annual periods beginning on or after

Long term interests in Associates and Joint Ventures – Amendments to IAS 28

The amendment clarifies that an entity applies IFRS 9 to long term interests in an associate or joint venture to which the equity method is not applied but that, in substance form part of the net investment in the associate or joint venture.The amendment will not have any impact on the financial reporting of the Company.

1 January 2019

Annual Improvements 2015–2017 Cycle (short-term exemptions)

In December 2017, the IASB issued these improvements containing the following amendments to IFRS; the amendments are effective for annual periods beginning on or after 1 January 2019 and include:

• IFRS 3 Business Combinations— Clarifies that when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including re-measuring previously held interests in the assets and liabilities of the joint operation at fair value.

• IAS 12 Income Taxes— Clarifies that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners.

• IAS 23 Borrowing Costs — Clarifies that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

• IFRS 11 Joint Arrangements— Clarifies that previously held interests in a joint operation are not remeasured when a party that participates in, but does not have joint control of a joint operation, obtains joint control.

The amendments will not have any impact on the financial reporting of the Company.

1 January 2019

Plan Amendment, Curtailment or Settlement – Amendment to IAS 19

Plan Amendment, Curtailment or Settlement – Amendment to IAS 19— Clarifies that when a plan curtailment or settlement occurs, the entity should determine the current service cost for the remainder of the period after the plan amendment using the actuarial assumptions used to remeasure the net benefit liability reflecting the benefits offered under the plan and the plan assets after that event. The entity should also determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability.

The Company has not recognized a plan asset or liability, and therefore the amendment will not have an impact on the Company’s financial statements.

1 January 2019

SANLAM 29

IFRIC 23 Uncertainty Over Income Tax Treatments - Interpretation clarifying the accounting for uncertainties in income taxes.The Company does not expect the interpretation to have a significant impact on its financial statements.

1 January 2019

Other amendments The following pronouncements are not expected to have any impact on the financial reporting of the Company:

• Definition of a Business – Amendments to IFRS 3

• Definition of Material – Amendments to IAS 1 and IAS

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28

1 January 2020

1 January 2020

Postponed indefinitely

IFRS 17 Insurance contracts

IFRS 17 supersedes IFRS 4 Insurance Contracts and aims to increase comparability and transparency about profitability. The new standard introduces a new comprehensive model (“general model”) for the recognition and measurement of liabilities arising from insurance contracts. In addition, it includes a simplified approach and modifications to the general measurement model that can be applied in certain circumstances and to specific contracts, such as:

• Reinsurance contracts held;

• Direct participating contracts; and

• Investment contracts with discretionary participation features.

Under the new standard, investment components are excluded from insurance revenue and service expenses. Entities can also choose to present the effect of changes in discount rates and other financial risks in profit or loss or OCI. The new standard includes various new disclosures and requires additional granularity in disclosures to assist users to assess the effects of insurance contracts on the entity’s financial statements.

The standard is effective for annual periods beginning on or after 1 January 2022. Early adoption is permitted.The company has begun assessing the potential impact on the financial statements resulting from the application this standard.

4. Risk management objectives and policies

The primary objective of the company’s risk and financial management framework is to protect the company’s shareholders from events that hinder the sustainable achievement of financial performance objectives,

including failing to exploit opportunities. Key management recognises the critical importance of having efficient and effective risk management systems in place.The company has established a risk management function with clear terms of reference from the board of directors, its committees and the associated executive management committees. This is supplemented with a clear organisational structure with documented delegated authorities and responsibilities from the board of directors to executive management committees

The company’s activities expose it to a variety of risks, including insurance risk, liquidity risk, credit risk, foreign currency exchange rates and interest rates. The disclosures below summarize the way the company manages key risks:

» Insurance risk

The principal risk the company faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long–term claims. Therefore, the objective of the company is to ensure that sufficient reserves are available to cover these liabilities.The risk exposure is mitigated by diversification across a large portfolio of insurance contracts. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.The company also purchases reinsurance as part of its risks mitigation programme.The main insurance risks that the company is exposed to are as follows:

• Mortality risk – risk of loss arising due to policyholder death experience being different than expected

• Morbidity risk – risk of loss arising due to policyholder health experience being different than expected


• Longevity risk – risk of loss arising due to the annuitant living longer than expected

• Investment return risk – risk of loss arising from actual returns being different than expected

• Expense risk – risk of loss arising from expense experience being different than expected

• Policyholder decision risk – risk of loss arising due to policyholder experiences (lapses and surrenders) being different than expected

The company’s underwriting strategy is designed to ensure that risks are well diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geography, the use of medical screening in order to ensure that pricing takes account of current health conditions and family medical history, regular review of actual claims experience and product pricing, as well as detailed claims handling procedures. Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the company has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of fraudulent claims. Insurance contracts also entitle the company to

pursue third parties for payment of some or all costs. The company further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the company.

» Financial risks

The company is exposed to a range of financial risks through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from insurance policies as they fall due. The most important components of this financial risk are market risk (including interest rate risk and currency risk), credit risk and liquidity risk.

These risks arise from open positions in interest rate and currency, which are exposed to general and specific market movements.

» Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by

failing to discharge an obligation. In the normal course of its business, the company incurs credit risk from financial institutions and accounts receivable. The credit risk exposure is, however, limited due to management’s constant monitoring of the status of financial institutions where deposits are maintained, and by the terms of the transaction agreement with the customers. There are no significant concentrations of credit risk within the Company. The following table summarises the company’s maximum exposure to credit risk before collateral held.

2018 2017Ushs ‘000 Ushs ‘000

Statutory deposit 2,698,244 2,325,611

Debt instruments – at amortised cost 6,004,597 -

Debt instruments – at fair value through profit or loss 17,419,763 -

Held to maturity financial assets - 14,616,588

Reinsurance receivables 5,446,332 71,733

Premium receivables 1,780,681 1,905,535

Other receivables 46,034 1,284,658

Bank balances 1,517,848 1,249,746

34,913,499 21,453,871

There was no collateral held on any of the above amounts. The ageing of premium receivables and other receivables at the reporting date has been disclosed in note 3.2.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. In respect of catastrophic events there is also a liquidity risk associated with the timing differences between gross cash out–flows and expected reinsurance recoveries.

The company maintains cash resources to meet the majority of these claims and also maintains a level of maturing funds that may be called upon should the available cash on current account prove insufficient to meet a given claim. Re-insurers may also be called upon based on the magnitude of the claim and the applicable reinsurance arrangements.

SANLAM 31

The table below summarizes the maturity profile of the company’s financial assets and liabilities based on contractual undiscounted receipts and payments.

At 31 December 2018 Up to 1 2 to 3 4 to 12 Over 12 Totalmonth months months months

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

AssetsDebt instruments - at amortised cost, and at FVTPL 2,036,985 3,477,208 7,319,890 24,284,290 37,118,373Other assets 46,034 - - - 46,034Premium receivables 1,780,681 - - - 1,780,681Cash and bank balances 1,517,848 - - - 1,517,848

5,381,548 3,477,208 7,319,890 24,284,290 40,462,936LiabilitiesOther liabilities 1,941,530 - - - 1,941,530Amounts due to related parties - - 2,060,928 - 2,060,928

1,941,530 - 2,060,928 - 4,002,458

Net liquidity gap 3,440,018 3,477,208 5,258,962 24,284,290 36,460,478

At 31 December 2017 Up to 1 2 to 3 4 to 12 Over 12 Totalmonth months months months


AssetsInvestment in unquoted shares - Uganda Reinsurance Company - - - 242,299 242,299 Held- to-maturity financial assets 1,341,387 196,200 4,579,500 8,499,500 14,616,587 Financial assets at fair value through profit or loss - - - 265,797 265,797 Other assets 1,356,391 - - - 1,356,391 Premium receivables 1,659,403 154,539 91,593 - 1,905,535Cash and bank balances 1,253,908 - - - 1,253,908

5,611,089 350,739 4,671,093 9,007,596 19,640,517LiabilitiesOther liabilities 3,259,730 - - - 3,259,730 Amounts due to related parties - - 1,350,498 - 1,350,498 Insurance contract liabilities - - 9,043,625 - 9,043,625

3,259,730 - 10,394,123 - 13,653,853Net liquidity gap 2,351,359 350,739 (5,723,030) 9,007,596 5,986,664

» Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

Market risk comprises three types of risk: foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk).

• Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Board sets limits on the level of exposure by currency. The company’s financial assets are primarily denominated in the same currencies as its insurance contract liabilities. This mitigates the foreign currency exchange rate risk. Thus, the main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which insurance liabilities are expected to be settled.


The company had the following significant foreign currency positions (all amounts expressed in Uganda Shillings):

Currency 2018 2017


Assets

Cash and bank balances USD 3,277 84,946

Liabilities

Amounts due to related parties - SEM ZAR (2,060,928) 998,509

Overall net position (2,057,651) (913,563)

At 31 December 2018, if the Uganda Shilling weakened by 10% against the US Dollar and the South African Rand, with all other variables held constant, this would have an impact of Ushs 206 million on the profit for the year (2017: Ushs 108 million). This variation in profitability is measured by reference to foreign currency exposures existing at year end.

31-Dec-18 31-Dec-17

Currency Change in Variable

Impact on profit before tax

Impact on profit before tax

Ushs 000 Ushs 000

USD + 10% 327 8,496

ZAR + 10% 206,093 99,851

USD - 10% (327) (8,496)

ZAR - 10% (206,093) (99,851)

» Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At 31 December 2018, the only interest-bearing instruments that the company held were treasury bills, treasury bonds and fixed deposits with financial institutions, all of which are at fixed interest rates (2017: all instruments were at fixed rates). In respect to these assets, the company is therefore not significantly exposed to interest rate risks.

Price risk

Price risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices, caused by factors specific to the individual financial instrument.

The Company’s price risk relates to financial assets whose values fluctuate as a result of changes in market prices. The Company does not issue any participating contracts, therefore there are no insurance or reinsurance contracts that are exposed to price risk.At 31 December 2018, the Company’s exposure to price risk was through equity instruments held at fair value, and listed on the Uganda Securities Exchanges.

The fair value of the listed equity instruments is directly related to the changes in the share price of the listed instruments. The table below summarizes the impact of a 10% increase/decrease of the share price of the instruments on the profit before tax and equity:

SANLAM 33

Impact on equity Impact on profit or loss2018 2018

Ushs ‘000 Ushs ‘000Change in share price +10% 28,834 28,834Change in share price -10% (33,165) (33,165)

• Capital management

The company’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial position, are to:

• comply with the capital requirements set by the Insurance Act, 2017;

• safeguard the company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

• maintain a strong capital base to support the development of its business.

The company manages its capital adequacy by employing techniques based on the Insurance Act, 2017 guidelines. The Insurance Act, 2017 requires the maintenance of the following in regard to capital management:

Share capital

Under Section 6 of the Insurance Act, 2017, an insurance company is required to have paid up capital of Ushs. 3 billion (three billion) for life (long-term) insurance business.

The company’s paid up issued capital as at 31 December 2018 exceeded this requirement. The company has paid up capital of Ushs 21.71 billion (2017: 18.69 billion).

Contingency reserve

The Insurance Act, 2017 requires insurance companies to maintain a contingency capital reserve. The contingency reserve is required to cover fluctuations in securities and variations in statistical estimates. With respect to life, the contingency reserve should equal to 1 percent of the premiums. The company monitors the overall capital adequacy following the above guidelines. The company has met the above statutory requirements. Actuarial valuation was done and resulted into a surplus as per the actuarial report.

» Approach to capital management

The company seeks to optimize the structure and sources of capital to ensure that it consistently maximizes returns to the shareholders and policyholders.The company’s approach to managing capital involves managing assets, liabilities and risks in a coordinated way, assessing shortfalls between reported and required capital levels on a regular basis and taking appropriate actions to influence the capital position of the Company in the light of changes in economic conditions and risk characteristics.

The primary source of capital used by the company is equity shareholders’ funds. The capital requirements are routinely forecast on a periodic basis and assessed against both the forecast available capital and the expected internal rate of return, including risk and sensitivity analyses. The process is ultimately subject to approval by the Board. The company has had no significant changes in its policies and processes to its capital structure during the past year from previous years.

2018 2017Ushs’000 Ushs’000

Insurance contract liabilities excluding unearned premium reserve 14,372,762

9,043,625

Trade and other payables 5,447,156 4,610,228Less: Cash and short - term deposits (1,527,489) (3,886,451)Net payable or debt 18,292,429 9,767,402

Equity 23,265,170 19,835,776

Capital and net payable or debt 41,557,599 29,603,178

Gearing 44% 33%


» Fair value

The company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly from the market; and

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

The quoted market price used for financial assets held by the company is the current bid price. Instruments included in level 1 comprise primarily Uganda Securities Exchange equity instruments classified as trading securities.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates.

The tables below sets a comparison by category of the carrying amount and fair values of the Company’s financial instruments.

2018

Level 1 Level 2 Level 3Total Fair Value

Carrying Value

UShs’000 UShs’000 UShs’000 UShs’000 UShs’000

Financial Assets

Cash and bank balances* - - - 1,509,932 1,509,932

Investment in unquoted shares - 277,500 - 277,500 277,500

Debt instruments at amortised cost* 6,004,597 6,004,597

Debt instruments at fair value through profit or loss

17,419,763 17,419,763 17,419,763

Investment in quoted shares 312,157 - - 312,157 312,157

Reinsurance receivables* - - - 5,446,332 5,446,332

Other receivables* - - - 645,173 645,173

Premium receivables* - - - 1,780,681 1,780,681

Total 17,731,920 277,500 - 33,396,135 33,396,135

Financial Liabilities**

Commission payable - - - 15,429 15,429

Amount due to related parties

- -- 2,060,928 2,060,928

Claims payable - - - 1,429,269 1,429,269

Other payables - - - 1,941,530 1,941,530

Total - - - 5,447,156 5,447,156

*Due to the short-term nature of these instruments, their carrying values approximate the fair value of the instruments.

**The financial liabilities are short-term in nature, and therefore the carrying amounts approximate their fair values.

Fair value of the unquoted ordinary shares has been estimated using the net asset value of the investments. Based on the published result of the investment, the directors compute the value of the investment based on the number of shares in issue and the value per share.

SANLAM 35

The price per share of the investee as at 31 December 2018 was 1.85 million (2017: Ushs 1.58 million) The share price was derived by dividing net assets of the investee, attributable to shareholders assessed at Ushs 24,252 million (2017: 20,567 million), by the number of shares in issues, 13,108 as at 31 December 2018 (2017: Ushs 12,991 shares).

The fair value of treasury bills and treasury bonds was obtained from published records obtained from the Central Bank (Bank of Uganda) as at 31 December 2018. The bills/ bonds are actively traded on a primary market, and are issued by the Government of Uganda, through the Central Bank.

31 December 2017 2017 Carrying

Level 1 Level 2 Level 3 Total Value ValueUShs’000 UShs’000 UShs’000 UShs’000 UShs’000

Financial Assets

Cash and bank balances - - - 1,253,908 1,253,908

Statutory deposits - - - 2,325,611 2,325,611

Investment in unquoted shares

- 242,299 - 242,299 242,299

Held to maturity investments

- - - 14,616,588 14,616,588

Investment in quoted shares

265,797 - - 265,797 265,797

Reinsurance receivables - - - 71,733 71,733

Other receivables - - - 1,284,658 1,284,658

Premium receivables - - - 1,905,535 1,905,535

Total 265,797 16,942,199 4,758,133 21,966,129 21,966,129

Financial Liabilities

Insurance contract liabilities

- - - 9,043,625 9,043,625

Reinsurance payable - - - 251,667 251,667

Commission payable - - - 34,727 34,727

Amount due to related parties

- - - 1,350,498 1,350,498

Claims payable - - - 1,056,180 1,056,180

Other payables - - - 1,917,156 1,917,156Total - - - 13,653,853 13,653,853

Fair value of the unquoted ordinary shares has been estimated using the net asset value of the investments. Based on the published result of the investment, the directors compute the value of the investment based on the number of shares in issue and the value per share. Fair value of quoted equities is derived from quoted market prices in active markets (Uganda Securities Exchange).

» Sensitivities to insurance risk

The following analysis shows the impact on profit before tax for reasonably possible movements in key assumptions, with all other assumptions held constant. Sensitivity information varies according to the current economic assumptions due to the impact of changes to both the intrinsic cost and time values of options.

2018 2017

Ushs’000 Ushs’000

Change in expenses:

+10% (1,159,870) (902,747)

-10% 1,159,870 902,747

During the year ended 31 December 2018, actual claims were Ushs 10,323 million (2017: 10,655 million). Estimated claims for the year ended 31 December 2018 were Ushs 10,866 million (2017: Ushs 12,535 million).

Concentration:

All insurance policies were issued in Uganda.


» Significant accounting judgments, estimates and assumptions

The preparation of the company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Estimates and assumptions

The major items subject to the application of estimates, assumptions and judgments include:

» Valuation of insurance contract liabilities

Classification

A contract is classified as insurance where Sanlam accepts significant insurance risk by agreeing with the policyholder to pay benefits if a specified uncertain future event (the insured event) adversely affects the policyholder or other beneficiary.

Significant insurance risk exists where it is expected that for the duration of the policy or part thereof, policy benefits payable on the occurrence of the insured event will significantly exceed the amount payable on early termination, before allowance for expense deductions at early termination. Once a contract has been classified as an insurance contract, the classification remains unchanged for the remainder of its lifetime, even if the insurance risk reduces significantly during this period.

Valuation

The sections below outline the valuation methodology for assets and liabilities:

The valuation bases and methodology used to calculate the policy liabilities of all material lines of long-term insurance business is set out below.

The valuation bases and methodology comply with the Insurance Act and the South African actuarial guidelines as set out in the standard of actuarial practice note SAP 104. Minimum liabilities are held based on a prospective calculation of policy liabilities, and where a retrospective basis is used, it is at least equal to the prospectively calculated liabilities. This serves as a liability adequacy test.

Assets are valued at their full balance sheet value. Assets pertaining to the Group Deposit Administration portfolio are segregated from other assets belonging to policyholders and shareholders.

Group life and group credit life business:

An unearned premium reserve is calculated. This represents the element of premiums already received where cover has not yet been provided. For group credit life business where specific policy data is not available, this is based on a straight line amortisation of the single premium received over an assumed average loan term. An incurred but not reported reserve is also held for both lines of business.

Group deposit administration business:

The total reserve held is the market value of the fund, which refers to the underlying assets of the deposit administration portfolio and is an accumulation of the net contributions at the actual investment returns earned, which can be positive or negative. It is reduced by benefit payments, terminations, charges and applicable taxes.

The total reserve is split into:

• A portion belonging to the members, referred to as the book value, which is the guaranteed benefit payable and is an accumulation of the net contributions at the bonus rates declared. The bonus rates declared would be subject to the minimum rate that has been promised to members. It is reduced by benefit payments, terminations and charges; and

• A bonus stabilization reserve (BSR), which is the difference between the market value (the total reserve) and the book value (member accounts).

Individual life business:

Individual life liabilities are valued prospectively, with negative reserves zeroised on a per-policy basis. The following reserves are held:

• The unit reserve, which relates to the savings component of Dreambuilder policies, and is calculated as the number of units multiplied by the unit price (less a surrender penalty for inactive policies);

• The bonus stabilisation reserve for the Dreambuilder product, which is an accumulation of past over-/ under-declarations of bonuses relative to the actual investment return earned on the funds; and

• The non-unit reserve, which relates to the remaining liabilities on the individual life book. Simplistically, this is calculated by projecting all future outgoes less all future income and discounting these reserving cash flows back to the valuation date.

Estimates are also made as to future investment income

SANLAM 37

arising from the assets backing life insurance contracts. These estimates are based on current market returns, as well as expectations about future economic and financial developments.

Assumptions on future expense are based on current expense levels, adjusted for expected expense inflation, if appropriate. Lapse and surrender rates are based on the company’s historical experience of lapses and surrenders. Discount rates are based on current industry risk rates, adjusted for the company’s own risk exposure.

The carrying value at the reporting date of life insurance contract liabilities is Ushs 14.4 billion (2017: Ushs 9.0 billion).

For medical contracts, estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred, but not yet reported, at the reporting date (IBNR). It can take a significant period of time before the ultimate claims cost can be established with certainty and for some type of policies, IBNR claims form the majority of the liability in the statement of financial position.

» Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the company and the tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing.

Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with tax planning strategies.

Government taxesThe company is subject to income tax and various other government taxes under the Ugandan tax laws. Significant estimates and judgements are required in determining the provision for taxes on certain transactions. For these transactions, the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income statement.

» Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.

Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.


5. Net premiums

Gross premiums

2018 2017


Group life 4,750,762 2,690,131

Individual Life 7,940,830 6,921,858

Credit life 8,347,470 5,681,099

Medical 14,146,412 9,510,697

35,185,474 24,803,785

Premiums ceded to reinsurers

Group life (1,680,595) (245,110)

Medical (5,088,601) (78,155)

(6,769,196) (1,012,558)

Change in UPR (293,012) (689,293)

Total net premiums 28,123,266 23,791,227

6. Investment income

2018 2017


(a) Interest income using the EIR

Interest income on fixed deposits 255,125 92,570

Interest income on government securities 2,831,153 1,558,631

Deposit administration premium funds (DAP funds) ** - 102,715

3,086,278 1,753,916

(b) Other investment income

Deposit administration premium funds (DAP funds) ** 194,545 -

Dividend income - 678

Bank interest 12 107,669

194,557 108,347

**This is composed of interest earned on fixed deposits, and government securities.

7. Other operating income

2018 2017


Gain on sale of property and equipment 58,254 9,522

Foreign exchange gains on related party balance 16,831 15,387

Other operating income*** 190,083 273,280

265,168 298,189

***Other operating income mainly relates to reversal of credits on overdrawn accounts, that have since been closed.

SANLAM 39

8. Gross policy holders’ benefits and claims

2018 2017Ushs’000 Ushs’000

Group life 2,719,548 2,555,041 Individual Life 261,220 313,476 Maturities 72,431 -Refunds 175,468 197,576 Surrenders 170,872 160,432 Medical 6,923,392 7,428,225

10,322,931 10,654,750

9. Net change in insurance contract liabilities

2018 2017Ushs ‘000 Ushs ‘000

Change in group credit Unearned Risk Reserve (URR) 3,482,565 992,944Change in Incurred but Not Reported (IBNR) claims: Sancare and credit life 29,078 76,920

Change in group life Unearned Risk Reserve (URR) 880,892 (52,217)Change in group life IBNR claims 142,277 44,394Change in individual life reserve 28,749 155,328Change in DAP reserve 765,576 453,872

5,329,137 1,671,241

10. Finance costs

2018 2017


Interest expense - 68,176

- 68,176


10(a) Expected credit losses on debt instruments at amortized cost

During the year, the Company adopted IFRS 9 and credit losses have been computed on debt instruments, held at amortized cost in accordance with IFRS 9.

The table below shows the maximum exposure to credit risk from debt instruments at amortized cost, based on the Company’s credit rating system and year-end stage classification, and the impairment provision recognized at year end:

Stage 1 Stage 2 Stage 3 ImpairmentCarrying amount

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Bank balances 1,526,313 - - (16,381) 1,509,932

Debt instruments at amortised cost (note 20) 6,070,254 - - (65,657) 6,004,597

Statutory deposits (note 18) 2,726,769 - - (28,525) 2,698,244

Staff debtors 46,034 - 46,034Total 10,369,370 - - (110,563) 10,258,807

The movement in credit losses, during the year is further analyzed as follows:

2018 2017


At 1 January - -

Impact of adoption of IFRS 9 – day 1 130,910 -

Credit to profit or loss (20,347) -

At 31 December 110,563 -The credit to profit or loss during the year is assessed as follows:

Stage 1 Stage 2 Stage 3 Total

Ushs’000 Ushs’000 Ushs’000 Ushs’000

Bank balances 1,703 - - 1,703

Debt instruments at amortised cost (25,132) - - (25,132)

Statutory deposits 3,082 - - 3,082

Total (20,347) - - (20,347)

SANLAM 41

10(b) Operating and administration expenses

2018 2017


Staff costs (note 10(b).1) 3,426,725 3,087,143

Auditors’ remuneration 189,192 152,100

Depreciation (note 16) 137,191 125,455

Amortisation (note 17) 91,151 18,062

Directors’ remuneration 81,959 97,262

Communication expenses 99,505 95,498

Rent 687,728 638,133

Printing and stationery 105,478 26,733

Travel 198,138 120,125

Insurance 20,381 25,555

Training levy 185,213 121,795

Investment costs 117,042 152,305

Marketing expenses 321,899 174,061

Professional and consultancy fees 354,447 164,541

Annual contribution to Insurance Regulatory Authority 505,911 376,198

Management and technical support 1,455,084 742,579

Information technology and systems related expenses 160,597 163,035

Other expenses 4,307,906 1,185,057

Bank charges 68,869 61,427

PCA service charges 303,542 205,333

Bad debts written off 1,260 321,007

Provision for premium debtors (IFRS 4) 94,886 974,061

12,914,102 9,027,465

Investment costs

These relate to investment manager and custodial fees and withholding tax on investment incomes.

Other expenses

These are general operating expenses including expenses relating to worksite activities, maintenance and fuel for motor vehicles, maintenance of business locations (buildings) and fixed assets, courier and postage, utilities, general office expenses, reverse Value Added Tax on management fees and withholding tax on income received from government securities and fixed deposits.

PCA service charges

Payroll Consults Africa Ltd (PCA) is an IT company that deals with various governments and departments in Africa to expertly provide cost effective, secure and reliable payroll management services. Uganda government has contracted PCA to manage all deduction requests from Financial Institutions e.g. banks, microfinance institutions, and insurance companies, hire purchase companies etc., who intend to lend and recover funds directly from the civil servants’ payroll on a monthly basis.

PCA service charges relate to a 2% fee paid to Payroll Consults Africa for individual life premium collections from various government departments.

Provision for premium debtors

The company provided for doubtful debts relating to premiums and agent debt that is due for 90 days and above (2017: 90 days).

Auditor’s remuneration

This relates to both internal and external audit fees. Internal audit is carried out by the parent company, Sanlam Group, in South Africa.


11. Staff costs

2018 2017


Salaries and wages 2,791,000 2,800,243

Staff welfare 392,702 195,812

Staff training and development 21,289 21,860

Staff bonus 221,734 69,228

3,426,725 3,087,143 The company had 52 permanent staff as at 31 December 2018 (2017: 50 employees). The company also hires temporary staff and interns from time to time as need arises.

Staff welfare expenses relate to costs borne by the company for the staff medical scheme. Staff bonus is a variable pay based on individual and company performance. The criteria for the bonus is set at the beginning of the year. The determination of the amount of bonus paid is based on individual performance which is assessed through a transparent and objective performance management process. The company’s performance is based on annual reported results.

12. Profit before tax

Profit before tax is stated after charging: 2018 2017


Depreciation of property and equipment 137,191 125,455

Amortisation of intangible assets 91,151 18,062

Auditors’ remuneration 189,192 152,100

Staff costs 3,426,725 3,087,143

13. Income Tax

» Income tax charge

2018 2017

Shs’000 Shs’000

Withholding tax paid 424,431 287,782

Deferred income tax charge /(credit) 113,820 (250,510)

538,251 37,272 The corporation tax rate is set at 30% of the profits for the year as adjusted for tax purposes in accordance with the Income Tax Act cap 340. The tax on the company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

2018 2017

Shs’000 Shs’000


Tax calculated at a tax rate of 30% 472,644 177,341

Tax effect on income subject to tax at 20%1 (240,352) (385,006)

Tax effect of expenses not deductible for tax purposes2 (4,086,653) 537,979

Prior year over provision (6,149,651) (122,493)

Unrecognised movement on carry forward losses - deferred tax 10,117,832 (458,331)

WHT on government securities 424,431 287,782

Income tax charge 538,251 37,272

SANLAM 43

1Tax is withheld on Interest income on government securities (treasury bills and treasury bonds) at a rate of 20%. This is a final tax, and cannot be claimed on the filed returns.

2Expenses not deductible or tax purposes include: provisions for unexpired insurance risk, provisions for incurred but not reported (IBNR) claims, ceded life insurance premiums, entertainment expenses, non-allowable motor vehicle expenses, fines/penalties and life insurance claims.

14. Share capital

Authorised Share Capital

2018 2017


23,305 ordinary shares of Ushs 1,000,000 each (2017: 23,305 of 1,000,000 each) 23,305,000

20,205 ordinary shares of Ushs 1,000,000 each (2017: 20,205 of 1,000,000 each) 20,205,000

Movement in authorized Share Capital

2018 2018 2017 2017Number Ushs’000 Number Ushs’000

At 1 January 20,205 20,205,000 20,205 20,205,000Increase in authorised ordinary shares 3,100 3,100,000 - -

23,305 23,305,000 20,205 20,205,000 Ordinary shares, issued and fully paid

2018 2017


21,714 ordinary shares of Ushs 1,000,000 each 21,714,000

18,690 ordinary shares of Ushs 1,000,000 each 18,690,000

21,714,000 18,690,000

During the year, the directors passed a resolution to increase the nominal share capital of the company from Ushs 20,205 million to Ushs 23,305 million by the creation of an additional 3,100 ordinary shares of Ushs 1,000,000 each. The shares were allocated to Sanlam Emerging Markets.

3,024 additional shares of Ushs 1,000,000 per share, with a total of Ushs 3,024 million were issued during the year. Therefore, as at 31 December 2018, 21,714 of the allocated shared capital had been issued, and was fully paid.

The holders of the ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at annual and other general meetings of the company.

15. Share premium

2018 2017Ushs’000 Ushs’000

Share premium 47,000 47,00047,000 47,000

16. Other reserves

2018 2017


Other reserves 49,250 49,250

49,250 49,250


This relates to excess funds received from the parent company from the purchase of shares in Sanlam Life Insurance Uganda Limited.

17. Contingency reserve

2018 2017


At 1 January 906,089 658,051

Transfer during the year 310,562 248,038

At 31 December 1,216,651 906,089

For life business, the contingency reserve is set up under Section 5 (b) of the Insurance Act Regulations, 2002. Provisions for these reserves are taken at 1% of the premiums written.

18. Capital reserve

2018 2017


At 1 January 143,437 115,744

Transfer during the year 91,234 27,693

At 31 December 234,671 143,437

For life business, the capital reserve is set up under Ugandan insurance laws and regulations. Provisions for these reserves are taken at 5% of the profits after tax.

SANLAM 45

19. Property and equipment

Furniture, fittings & Equipment

Computer equipment

Motor Vehicles

Leasehold Improvements

Total


Cost:

At 1 January 2017 342,293 414,489 177,920 136,349 1,071,051

Additions 125,873 79,934 38,650 14,243 258,700

Disposals (9,608) - (37,000) - (46,608)

At 31 December 2017 458,558 494,423 179,570 150,592 1,283,143

Additions 31,405 61,625 23,000 - 116,030

Disposals (77,995) (42,121) (28,300) (35,520) (183,936)

At 31 December 2018 411,968 513,927 174,270 115,072 1,215,237

Depreciation:

At 1 January 2017 156,963 339,980 160,739 23,455 681,137

Charge for the year 37,759 54,004 19,179 14,513 125,455

Disposals (2,930) - (37,000) - (39,930)

At 31 December 2017 191,792 393,984 142,918 37,968 766,662

Charge for the year 42,540 67,225 14,454 12,972 137,191

Disposals (52,394) (42,121) (28,300) (13,250) (136,065)

At 31 December 2018 181,938 419,088 129,072 37,690 767,788

Net book Value

At 31 December 2018 230,030 94,839 45,198 77,382 447,449

At 31 December 2017 266,766 100,439 36,652 112,624 516,481

20. Intangible assets

2018 2017

Cost Ushs’000 Ushs ‘000

At 1 January 103,218 82,619

Additions 76,456 20,599

At 31 December 179,674 103,218

Amortization

At 1 January 75,088 57,026

Charge for the year 91,151 18,062

At 31 December 166,239 75,088

Net book Value 13,435 28,130

The intangible assets comprise of the Pastel accounting software and People Manager Payroll system. The intangible assets are amortised over the useful life of 3 years.


21. Statutory deposits

2018 2017


At 1 January 2,325,611 488,363

Additional investment 690,238 2,493,936

Accrued interest 73,064 13,366

Maturities (362,144) (670,054)

Day 1 adjustment – expected credit losses (26,140) -

Charge for the year: (2,385) -

At 31 December 2,698,244 2,325,611

The company maintained a statutory deposit in treasury bills and bonds as required by the Insurance Act (Cap 213) for every insurer to maintain a security deposit of at least 10% of the prescribed paid up capital of the company. The deposit is part of the assets in respect of the capital of the insurer and is invested by the insurer in short term investments and securities. The deposit is only available to the insurer in case of a substantial loss arising from liabilities to claimants and the loss is such that it cannot be met from its available resources or in the event of closure or winding up of the insurance business. Interest is earned at an average coupon rate of 16% on treasury bonds. The carrying amount of statutory deposits as at 31 December 2018 approximates the fair value

22. Investment in unquoted shares

2018 2017


At 1 January 242,299 150,000

Fair value gain 35,201 92,299

At 31 December 277,500 242,299

The company owns 150 shares valued at Ushs 1,850,000 each in Uganda Reinsurance Company Limited (2017: 150 shares of Ushs 1,615,000 each). Fair value of the unquoted shares has been estimated using the net asset value of the investments. Based on the published results of the investment, the directors computed the value of the investment based on the number of shares and the value per share.

23. Debt instruments

2018 2017


Held to maturity investments

Treasury bonds - 8,598,067

Treasury bills - 3,385,978

Fixed deposit - 2,632,543

14,616,588

Debt instruments – at amortised cost

Treasury bonds 3,464,345 -

Treasury bills 1,484,612 -

Fixed deposit 1,121,297 -

6,070,254 -

Expected credit losses – day 1 (65,657) -

6,004,597 -

As at 1 January 2018, held to maturities investments were reclassified and are now accounted for as debt instruments, at amortised cost in accordance with IFRS 9. Credit losses were computed in accordance with the guidelines in the accounting policies. The movement in the expected credit losses is analysed as follows:

SANLAM 47

At 1 January: -

Day 1 charge to equity: 90,789

Credit to profit or loss (25,132)

At 31 December: 65,657

2018 2017


Debt instruments – at fair value through profit or loss

Treasury bonds 12,255,049 -

Treasury bills 4,331,155 -

Fixed deposit 1,196,888 -

17,783,092 -

Fair value loss – day 1 (85,412) -

Net fair value movement charged to profit or loss (277,917)

17,419,763 -

At 31 December, debt instruments – at amortised cost, and debt instruments at fair value through profit or loss are allocated as follows:

2018

Policy holders

Share holders

Deposit administration Sancare

SmoothedBonus Total

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Classification FVTPL AC FVTPL AC FVTPLTreasury bonds 9,771,228 2,866,725 1,166,377 561,446 997,115 15,362,891

Treasury bills 3,671,286 37,028 241,935 1,431,461 412,358 5,794,068

Fixed deposits 699,169 762,235 440,281 345,702 20,014 2,267,40114,141,683 3,665,988 1,848,593 2,338,609 1,429,487 23,424,360

AC – Amortized cost; FVTPL – Fair Value Through Profit or Loss

2017

Policy holders

Share holders

Deposit administration Sancare

Smoothed Bonus Total

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000Treasury bonds 2,148,518 3,524,378 485,170 962,381 - 7,120,447

Treasury bills 1,034,725 1,188,366 200,506 2,440,001 - 4,863,598

Fixed deposits 1,727,338 125,300 259,989 505,664 14,252 2,632,543

4,910,581 4,838,044 945,665 3,908,046 14,252 14,616,588

Under the Ugandan insurance laws and regulations, the company is required to maintain a deposit equivalent to 20% of the security (statutory) deposit with a commercial bank. The company held fixed deposits with various banks of Ushs 2.29 billion (2017: 2.63 billion) which is above the statutory requirement.


24. Investment in quoted shares

2018 2017


At 1 January 265,797 230,088

Net movement during the year - 72,859

Fair value gains/(losses) 46,360 (37,150)

312,157 265,797

At 31 December 2018, the financial assets, which measured at fair value through profit or losses were allocated as follows:

2018 2017


Policyholders 286,648 242,454

Shareholders 25,509 23,343

312,157 265,797

The above investments relate to shares purchased in various companies that are listed on the Uganda Securities Exchange (USE).

31 December 2018

Stanbic Bank

The New Bank of Dfcu Umeme Total

Uganda Vision Baroda Bank LimitedLimited Group Limited Limited

Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000 Ushs ‘000

Policy holders

At 1 January 3,270 8,755 14,125 187,304 29,000 242,454Fair value changes 450 (2,994) 3,375 49,163 (5,800) 44,194At 31 December 3,720 5,761 17,500 236,467 23,200 286,648Shareholders

At 1 January 2,180 2,060 6,780 8,323 4,000 23,343Fair value changes 300 (704) 1,620 1,750 (800) 2,166At 31 December 2,480 1,356 8,400 10,073 3,200 25,509

31 December 2017

Policy holders

At 1 January 3,000 9,265 15,500 144,606 35,525 207,896Net movement during the year - - - 69,488 - 69,488Fair value changes 270 (510) (1,375) (26,790) (6,525) (34,930)At 31 December 3,270 8,755 14,125 187,304 29,000 242,454Shareholders

At 1 January 2,560 2,424 9,300 7,879 6,300 28,463Net movement during the year - - - 3,371 - 3,371Fair value changes (560) (244) (1,860) (2,207) (1,400) (6,271)

At 31 December 2,180 2,060 6,780 8,323 4,000 23,343Total 5,450 10,815 20,905 195,627 33,000 265,797

The trading prices at the last date of trading for the years ended 31 December 2018 and 2017 were as follows:

SANLAM 49

Share price Stanbic Bank Uganda Limited

The New Vision Group

Bank of BarodaLimited

dfcu Bank Limited

Umeme Limited

Ushs Ushs Ushs Ushs Ushs

31-Dec-18 31.00 339 140 823 320

31-Dec-17 27.25 515 113 680 400

25. Related party transactions

The following are the key related parties:

Name Nature of relationship

2018

Nature of relationship2017

Sanlam Emerging Markets Limited 98.6% shareholder 98.4% shareholder

Hannington Karuhanga 1.4% share holder 1.6% share holderSanlam Kenya Limited Common ownership Common ownershipSanlam General Insurance Uganda Limited Common ownership Common ownershipSanlam Investments East Africa Limited Common ownership Common ownershipSanlam Limited Ultimate holding

companyUltimate holding company

Balances with related parties

The following were the balances with related parties at 31 December.

2018 2017


Amounts due to related parties

Sanlam Emerging Markets 2,060,928 998,509

Sanlam Investments East Africa Limited - 16,908

Sanlam General Insurance Uganda Limited - 335,081

2,060,928 1,350,498

Other related party transactions 2018 2017


Sanlam Investments East Africa Limited 31,501 35,044

Sanlam General Insurance Uganda Limited 20,380 25,555

51,881 60,599 Other related party transactions related to premium paid to Sanlam General Insurance Uganda Limited relating to insurance of assets, and group personal accident and investment fees paid to Sanlam Investments East Africa Limited for managing T-bills, T-bonds and fixed deposits of Sanlam Life Insurance Uganda Limited

Terms and conditions of transactions with related partiesOutstanding balances at the year-end are unsecured. There have been no guarantees provided or received for any related party receivables or payables.

For the year ended 31 December 2018, the company has not recorded any impairment of receivables relating to amounts owed by related parties (2017: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.


Key management compensation

2018 2017Ushs ‘000 Ushs ‘000

Directors’ fees 81,958 97,262 Salaries and short-term employee benefits 782,525 1,168,854Performance bonus 233,809 137,062

1,098,292 1,403,178

Management fees

2018 2017Ushs ‘000 Ushs ‘000

Actuarial fees 389,453 273,631Product development costs 77,907 22,764Bancassurance fees 1,975 32,278Human resource support fees - 1,235Training and technical support 985,749 166,794

1,455,084 496,702 Management fees are charged by the parent company (Sanlam Emerging Markets Limited).

26. Reinsurance balances

Reinsurance receivables

2018 2017


At 1 January 71,733 90,351

Receivable arising during the year 8,520,048 9,974

Payments received during the year (3,145,449) (28,592)

At 31 December 5,446,332 71,733

The above re-insurance receivables relates to the medical business.

Reinsurance payable

2018 2017


At 1 January 251,667 170,780

Reinsurance ceded during the year 2,932,915 1,012,558

Claims ceded to reinsurers (2,488,196) (273,820)

Profit commission receivable from reinsurers 4,860,126 (2,440)

Less: Payments made during the year (1,526,607) (655,411)

At 31 December 4,029,905 251,667

The above re-insurance payable relates to both the medical business and the life business.

SANLAM 51

27. Deferred tax

Deferred tax is calculated on all temporary differences under the statement of financial position liability method using a principal rate of 30%.

The net deferred tax asset at 31 December 2018 is attributable to the following items;

2018 2017

Shs ‘000 Shs ‘000

At start of year (538,945) (288,435)

Charge / (credit to P&L) 113,820 (250,510)

At end of year (425,125) (538,945) The recognized deferred tax asset is attributable to the movement in temporary differences between calculations of certain items for accounting and for taxation purposes as detailed below:

31 December 2018

01/01/2018 Charged/ 31/12/2018

(credited)

to P/L

Shs’000 Shs’000 Shs’000

Accelerated tax depreciation 166,407 (34,224) 132,183

Bad debt provisions (1,281,898) 338,527 (943,371)

Provision for long term incentive (350,035) (108,992) (459,027)

Provision for bonus (216,641) (138,089) (354,730)

Provision for staff leave (277,744) 158,242 (119,502)

Unrealised forex loss 15,625 - 15,625

Fair value gain on debt instruments - (277,917) (277,917)

Fair value gain on quoted/unquoted shares 147,803 441,853 589,656

Taxable differences (1,796,483) 379,400 (1,417,083)

Net deferred tax liability/ (asset) at 30% (538,945) 113,820 (425,125) 31 December 2017

01/01/2017 Charged/ 31/12/2017

(credited)

to P/L

Shs’000 Shs’000 Shs’000

Deferred tax liabilities

Accelerated tax depreciation 135,421 30,986 166,407

Short term timing differences (1,189,524) (921,169) (2,110,693)

Fair value gain on quoted/unquoted shares 92,654 55,149 147,803

Taxable differences (961,449) (835,034) (1,796,483)

Net deferred tax liability/ (asset) at 30% (288,435) (250,510) (538,945)


Unrecognised deferred tax asset

At 31 December 2018, a deferred tax asset of Ushs 13,607 million (2017: Ushs 3,489 million) arising from cumulative tax losses was not recognised in these financial statements because the company is not certain of future taxable profits against which the temporary differences will be utilised.

31 December 2018

01/01/2018Unrecognised

movement31/12/2018

to P/L

Shs’000 Shs’000 Shs’000

Deferred tax asset

Tax losses carried forward (11,631,940) (33,726,108) (45,358,048)

Deferred tax asset at 30%(3,489,582) (10,117,832) (13,607,414)

31 December 2017

01/01/2017Unrecognised

movement31/12/2017

to P/L

Shs’000 Shs’000 Shs’000

Deferred tax asset

Tax losses carried forward (13,159,710) 1,527,770 (11,631,940)

(13,159,710) 1,527,770 (11,631,340)

Deferred tax asset at 30% (3,947,913) 458,331 (3,489,582)

28. Other receivables

2018 2017


Staff advances 46,034 45,932

Withholding tax recoverable 10,191 29,915

Prepayments 374,612 281,487

430,837 357,334

Other receivables 215,596 1,196,037

Direct write offs - agent debtors (1,260) (268,713)

645,173 1,284,658

The movement in provision for bad and doubtful debts (other receivables) is analysed below:

2018 2017


At 1 January 268,713 -

Recoveries (267,453) -

Impairment provision during the year - 268,713

At 31 December 1,260 1167167,706

268,713

SANLAM 53

Premium receivables

2018 2017


Gross premium receivables 2,556,345 2,923,384

Provision for bad and doubtful debts (775,664) (1,017,849)

Net carrying value 1,780,681 1,905,535

The movement in provision for bad and doubtful debts (premium receivables) is analysed below:

2018 2017


At 1 January 1,017,849 312,501

Recoveries (242,093) -

Impairment provision during the year - 705,348

Bank 775,756 1,017,849

Rights arising from insurance contracts are excluded from the scope of IFRS 9, therefore premium receivables have been impaired in accordance with the company’s policies.

29. Cash and cash equivalents

2018 2017


Bank 1,517,848 1,249,746

Cash at hand 8,464 4,091

Cash in Transit - 71

1,526,312 1,253,908

Impairment - expected credit losses (16,380) -

1,509,932 -

The Company holds no collateral in respect to the bank balances. Bank balances are short-term deposits made for varying periods depending on the cash requirements of the Company, and earn interest at the applicable market deposit rates. Cash and cash equivalents for the purpose of the statement of cash flows include the above cash and bank balances. Of the total credit losses, Ushs 14,678 arose on 1 January 2018 and has been charged directly to equity.

30. Insurance contract liabilities

2018 2017Ushs’000 Ushs’000

Reserves Group credit Unearned Risk Reserve (URR) 8,034,543 5,076,919Incurred but Not Reported (IBNR) claims: credit life 405,706 376,628 Group life Unearned Risk Reserve (URR) 2,001,031 927,892 Group life IBNR claims 394,651 444,621 Dream builder unit reserve 1,066,923 1,038,174 Individual life reserve 606,059 81,118 Deposit Administrative Reserve 1,863,849 1,098,273 Actuarial reserve for the year 14,372,762 9,043,625


The Company determines its liabilities on the insurance contracts based on assumptions in relation to average loan duration for the credit life business, reserving loss ratios for the group and credit life business, average investment return for the Deposit Administration business and unit maintenance and acquisition costs for individual life unit expenses.

The liabilities are determined on the advice of the consulting actuary and actuarial valuations are carried out on an annual basis.

The latest actuarial valuation of the insurance contract liabilities was carried out as at 31 December 2018 by Edwin Splinter, an actuary with Sanlam Group (South Africa) using the net Premium Valuation method. This method is generally accepted in the actuarial industry as an appropriate method to place a realistic value on the liabilities of a life insurance company. The expected future cash flows are determined using best estimate assumptions with allowance for provision of risk margin for adverse deviation from the expected experience, and with due regard to significant recent experience.

By setting appropriate assumptions this method determines liabilities which are consistent with the value of assets included in the accounts.

The more significant valuation assumptions are summarised below;

• Average loan duration – The average loan term was assumed to be 36 months for all loan facilities in accordance with the schemes experience that that has shown that loans are foreclosed in an average period not exceeding 2 years.

• Reserving loss ratios – A loss ratio of 80% was applied to the UPR for Group Credit and Group Life policies to cater for the policy handling charges like commission expense and overhead acquisition costs.

• Average investment return – An average investment return (net of management charges and withholding tax) of 7.5%–8% was used to calculate the Group Deposit Administration reserve for the December 2018 valuation.

• Unit maintenance and acquisition costs. The expected unit maintenance expenses were determined to be Ushs 133,258 (2017: Ushs 75,857) and the unit acquisition expenses to be Ushs 419,880 (2017: Ushs 171,071) within the next 2 years. This is consistent with experience in similar countries.

As at 31 December 2018, an internal review was carried out by the actuarial team which sits in South Africa.

31. Other payables

2018 2017


Accrued expenses 374,888 176,766

Bonus payable 354,730 216,641

Provision for long term incentives 578,527 350,033

Supplier control account 54,794 284,819

Withholding tax payable(WHT) 100,006 22,922

Value added tax payable (VAT) 24,037 22,858

Others 454,548 843,117

1,941,530 1,917,156

Other liabilities are non-interest bearing and are normally settled on 30-60 days terms.

Deferred acquisition costs

2018 2017


At 1 January 1,192,933 1,744,360

Increase/(decrease) arising from current year commissions: 247,834 (551,427)

At 31 December 1,440,767 1,192,933 Deferred acquisition costs relate to advance commission payments made to agents and their leaders.

SANLAM 55

Provision for unearned premium

2018 2017


Provision for un earned premium 4,106,986 3,417,693

Increase in provision 293,012 689,293

4,399,998 4,106,986

This relates to premiums for the medical business (Sancare) for which insurance cover has not yet been provided to the clients. It relates to medical policies running beyond the reporting period.

Commission payable

2018 2017


Commission payable 15,429 34,727

15,429 34,727

Claims payable-Medical

2018 2017


Claims payable 1,429,269 1,056,180

1,429,269 1,056,180

Commitments and contingencies

Uganda Insurance Association (representing players in the insurance industry) has appealed against the Tax Arbitration Tribunal decision that agents are employees of insurance companies and that their emoluments should be subject to the appropriate PAYE rates and not the 6% withholding tax as it had been communicated. The exposure to the Company could not be assessed since the case has not yet been concluded. The company is also a defendant in a suit lodged by an ex-employee with a claim of Ushs 361 million, for which the Company lawyers have assessed that the Company has high chance of success in the suit and therefore, no provision has been made in the financial statements.

Leases

The future minimum lease payments under non-cancellable operating leases are as follows:

2018 2017


Within one year 671,933 372,964

1 to 5 years 15,795 78,258

More than 5 years - -

687,728 451,222

Subsequent events

The Company has evaluated the subsequent events through the date of signing these financial statements and there were no significant events to be reported during the period.

Country of incorporation

Sanlam Life Insurance Uganda Limited is incorporated in Uganda under the Companies Act of Uganda as a company limited by shares and domiciled in Uganda.

Presentation currency

These financial statements are presented in Uganda shillings rounded off to the nearest thousands (UShs ‘000).

Ultimate controlling party

The ultimate controlling party of the entity is Sanlam Limited, a company incorporated in the republic of South Africa.

SANLAM 1 · 2019. 12. 10. · SANLAM 5 on the Statement of Financial Position as set on these...

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